Adam Smith's Lost Legacy

Tuesday, February 28, 2017

PROFESSOR BASU IS MISTAKEN

Kenneth Arrow, Possibly the Most Important Economist of the 20th Century

“His next big breakthrough was in general equilibrium. Ever since Adam Smith’s famous book in 1776, economists have talked about the “invisible hand” – how competitive markets can coordinate the selfish pursuits of individuals to result in socially desirable equilibrium. Would this always be the case and when could we be sure that an equilibrium would actually exist? This was an enormous research agenda and many economists worked on it in the second half of the 20th century. But the big break came from the joint research of Ken Arrow and Gérard Debreu, published in Econometrica in 1954.”

COMMENT

Professor Basu is Incorrect to allege that: “Ever since Adam Smith’s famous book in 1776, economists have talked about the “invisible hand” – how competitive markets can coordinate the selfish pursuits of individuals to result in socially desirable equilibrium."

While Adam Smith was alive, no economists "talked about"/wrote about Adam Smith's use of the "invisible hand".

Indeed, even his close family friend, Professor Dugald Stewart, who knew Adam Smith well and who lectured on Wealth of Nations at Edinburgh University in the 1800s and published his lectures, including the very passage with the "invisible hand", said not a word about the modern myth of 'an invisible hand' or its alleged significance.

The same absence of comment applies to such as David Ricardo, Bentham, Mill and the others who followed Smith. Only in the 1870s-1900s was there 5 mentions of the Adam Smith and the invisible hand' in disparate references in passing, one in a Fellowship paper at Cambridge (England) by a lawyer.

Similarly to the 1940s. The main source of the 'selfish' interpretation came from Paul Samuelson in 1948 in his Economics, textbook, 5 million sales to 2010. It is now ubiquitous.

This does not, of course, distract from the significance of Kenneth Arrow, a real giant among the rest of us.

Friday, February 17, 2017

GOOD NEWS OF KIRKCALDY'S ANNUAL ADAM SMITH LECTURE IN MARCH

Kirkcaldy to host ‘Festival Of Ideas’ Launch of a national conversation Event includes first Jo Cox Memorial lecture.

A festival of ideas and a cast of big names – and they’re all coming to Kirkcaldy to honour Adam Smith. The town’s most famous son is the inspiration behind the first Adam Smith Festival which runs from March 17-19. The influence of economist and philosopher will underpin the biggest event yet staged by the Adam Smith Global Foundation. And it will use the stage to debate the big issues as the world faces up to major political changes – from Brexit to Trump.

The festival will feature the traditional Adam Smith Lecture which has been delivered by leading politicians and figureheads across the decades. Ed Balls, the man who went from politics to the dance floor and entertained the country on ‘Strictly’, launches the festival with his speech entitled Strictly Smith. Brendan Cox will deliver the inaugural Jo Cox Memorial Lecture

The line-up over three days of debate and discussion includes a range of broadcasters, politicians, campaigners, entrepreneurs and philosophers. And Marilyn Livingstone, chief executive of the Adam Smith Global Foundation – the organisation behind the event – is delighted at how it has come together. She said: ‘‘There are huge changes happening in Scotland, and the UK as well as internationally. ‘‘To tap into that, we wanted to launch a Festival of Ideas and given Adam Smith’s role in the Scottish Enlightment, this is the best place to start the debate. ‘‘And we want to then come back one year on to see where we are and what has changed.

‘‘Never before has the discussion of ideas been more necessary as the world undergoes a bewildering set of economic, technological and cultural transformations. “The question we want to ask is that after a decade of seismic change, what will Scotland look like in the future?” The Festival of Ideas seeks to build on the Smith’s philanthropic and academic theories– and spark some animated discussions on topics such as cultural life, enterprise, and economies and cohesive communities. Saturday’s main speaker is Brendan Cox, an international campaigner and activist, whose wife, Jo Cox MP, was murdered last year. Both Brendan and Jo worked with Mr Brown over a number of years, and he will deliver the first Jo Cox Memorial Lecture in Kirkcaldy as part of the festival. It will be followed by a Q and A with the audience at the Adam Smith Theatre.

Mr Brown said: ‘‘We are fortunate to have Brendan Cox from Hope not Hate. ‘‘He was very keen to come and be part of the festival, and this will be a huge draw for people.’’ Mr Brown will also introduce former parliamentary colleague, Ed Balls, to Kirkcaldy, and then return to the venue on Saturday to form part of the panel to debate The New Economy 2025 with Martha Lane Fox, founder of lastminute.com, and Gerry Grimstone, chairman of Standard Life and deputy chairman of Barclays Bank. Saturday’s programme also includes a session discussing the third sector, led by broadcaster Sally Magnusson. That will then be followed by a debate on Society in 2025, with a panel which will include will feature entrepreneur Chris Van Der Kuyl.

On Sunday, the theme is New Scotland, New World. The schedule includes Sarah Brown introducing Arabella Weir, comedian, acstress and writer. Broadcaster Alistair Moffat will also host a conversation with a panel which will include Michael Moore, former Secretary of State for Scotland, the Rev Richard Holloway, and veteran broadcaster and journalist Kenneth Roy.

It’s the biggest event yet staged by the global foundation which is now based at 1 Adam Smith Close after restopring the 15th century building which sat at the foot of the garden behind Smith’s High Street home. The aim is to provide a weekend of debate and discussion – and the door is open to all to attend. Some of the events are also free of charge.

And with the organisers also creating a Yube Tube channel, the hope is this will be the star of an on-going debate on the key issues both locally and globally. ‘‘We want to maintain the momentum not only online, but attempt a real national conversation that will lead to a second event in Kirkcaldy in 2018. ‘‘This festival has been a long time in the planning , and it will allow us to show the outstanding work taking place in Kirkcaldy, and will firmly establish Fife as a key economic player and as a place of ambition. The event is supported by Kirkcaldy Area Committee, Fife Cultural Trust and Kirkcladuy’s Ambitions. The debates take place at the Adam Smith Theatre.

Cllr Neil Crooks, chairman of the area committee and Kirkcaldy Ambitions Group said; ‘This is a once in a generational opportunity for Kirkcaldy to support the legacy of Adam Smith and welcome such a prestigious and exciting event to our town. “I hope its impact will be far reaching and support the economic and social wellbeing of our communities’. Heather Stuart, chief executive officer of the Fife Cultural Trust, said; “We are delighted to be supporting the inaugural Adam Smith Festival of Ideas. ‘‘With such an inspirational line-up of speakers and events, Adam Smith Theatre is the perfect venue to host proceedings, having provided a hub for cultural activities in Kirkcaldy and beyond for almost 120 years.”

COMMENT

I have attended previous annual Adam Smith Lectures and can confirm the high worth of these programmes.

They are organised from a renovated historic building at the foot of Adam Smith’s mother’s house (since demolished and now a modern replacement commercial building). However, his mother’s garden remains intact and we know that Adam Smith wrote the WEALTH of NATIONS while living with his mother from 1766-73 at her house and would have walked in the garden while commposing his thoughts.
I recommend readers, if they can, to arrange to attend some or all of the events.

Wednesday, February 15, 2017

AT LAST! A POST ABOUT ADAM SMITH'S VIEWS WORTHY OF LOST LEGACY'S READERS

Stephen Miller, a writer and New Yorker, posts (13 Feb) on The Weekly Standard HERE

“What Did Adam Smith Really Believe?

Adam Smith (1723-1790) may be the most misunderstood British thinker of the last 500 years—misunderstood not by intellectual historians but by journalists and the educated public.”

COMMENT

I found Stephen Miller’s essay on Adam Smith both readable and more or less worthy of being read by all Lost Legacy readers. Copyright laws and the polite treatment of other people’s published writings (to be honoured by all other authors) prevents me from republishing it in full on Lost Legacy. I therefore strongly recommend that readers follow the link and read it for themselves.

It is more than just a step in the right direction to understanding Adam Smith’s actual views - it walks in six-yard strides in the right direction.

Here is a just a snippet (conforming as we always should to rules about “fair dealing” when borrowing other people’s property:

“By "invisible hand," Smith meant that people in commerce, who are driven by self-interest, frequently do more to promote the general welfare than people who work in what we would now call the nonprofit sector: A person "pursuing his own interest . . . frequently promotes that of the society more effectually than when he really intends to promote it." By saying "frequently," Smith qualifies his praise of commerce. And Smith never endorses greed. He says that commerce is not driven by benevolence: "It is not from the benevolence of the butcher, the brewer, or the baker," he writes, "that we expect our dinner, but from their regard to their own interest." It makes no sense to use the word greed to describe a seller's interest in making a profit, or a buyer's interest in getting the best price for a product or service.

Smith, however, did worry about greed. He deplored "the mean rapacity, the monopolizing spirit of merchants and manufacturers, who neither are, nor ought to be, the rulers of mankind." According to him, merchants and manufacturers often pursue their own interest by trying to curtail competition. Smith warned legislators that "the proposal of any new law or regulation of commerce" that comes from merchants or manufacturers "ought never to be adopted till after having been long and carefully examined." The operations of the market, he wrote, are often obstructed by "the folly of human laws.” (Stephen Miller in TheWeekly Standard)

Follow the link and read the rest. Also send your comments to me at Lost Legacy.

Friday, February 10, 2017

NO SUBSTITUTE FOR READING ADAM SMITH'S ACTUAL IDEAS

Dr. Robert J. Bunker, an Adjunct Research Professor, Strategic Studies Institute, US Army War College and Adjunct Faculty, Division of Politics and Economics, Claremont Graduate University, and Pamela Ligouri Bunker posts on Small Wars Journal HERE

“Plutocratic Insurgency Note No. 1: Eight Individuals are Now as Wealthy as the Poorest Half of the World”

“It challenges Adam Smith’s “Invisible Hand” metaphor, that pertains to the operations of a free market economy, by showing that some sort of sovereign economic regulation is indeed required in order to protect the public good. “

COMMENT

Robert and Pamela Bunker write an interesting essay on a contemporary economic fact, echo’s of which have recently been trailed in public discourse. I do not have time to discuss the hypothesis at present.

I simply want to observe that there is widespread misunderstanding, based mostly on widespread ignorance of Adam Smith’s actual use of the ‘invisible hand” metaphor. Such misleading pesentations were themselves a creation of modern economic theory, invented by the brilliant Pauld Samuelson in his 1948 textbook (19 editions to 2010), which dominated university economics departments from the 1960s to the new century. It was the set Economics 101 book when I was an undergraduate - then one day I read Wealth of Nations while on a 5-week vacation in France...

Adam Smith said many times that the anti-competitive actions of some “merchants and manufacturers” needed to be curbed where they intruded on competitive production and distribution. These people were the biggest campaigners for “fixed” non-competitive markets, with import tariffs, outright prohibitions, and the curbing by punitive legal sanctions against employees exercising their rights to bargain.

Indeed, Smith was so often critical of the anti-competitive behaviours of dominant class of players in the economy that those very few readers who study his Works, rather than just read quotations or other people’s selective reports of his ideas, must wonder about Smith’s public image as a free-market, anything goes campaigner. Smith had a balanced view of the powers of competitive markets within an appropriate legal system.

However, read Adam Smith and understand his actual ideas. In the meantime, I shall not hold my breath awaiting the penny or cent to drop about the authentic Adam Smith.

I have literally scores of pages underlined in The Evolution of Everything and am especially enamored with Ridley’s chapter on the evolution of economics.

What we see is not the result of human design

This decentralized emergence of order and complexity is the essence of the evolutionary idea that Adam Smith crystallized in 1776.

Yet, when Smith wrote his Wealth of Nations, there was little good evidence for his central idea that free exchange of goods and services would produce general prosperity.

Adam Smith is no paragon. He got plenty wrong, including his clumsy labor theory of value, and he missed David Ricardo’s insight about comparative advantage, which explains why even a country (or person) that is worse than its trading partner at making everything will still be asked to supply something, the thing it or he is least bad at making. But the core insight that he had, that most of what we see in society is (in Adam Ferguson’s words) the result of human action but not of human design, remains true to this day and under-appreciated.

COMMENT

Looks like the basis for an interesting line of thought, similar to a theme in my new book about Adam Smith.

I am glad to see we are not imposed upon by that school of ‘thought’ that describes Adam Smith as the ‘father’/grandfather of capitaism’, which is a sure sign that those who use the expression know little about Adam Smith or his predecessors and contemporaries in the UK or in the wider Europe, and, sadly, about the history of capitalism.

That Smith got some things wrong is correct. Realistically he and every other pioneer in any discipline gets things wrong that 200 years later can be shown to include many errors and ommisions, which are put right by subsequent scientific knowledge.

However, as I show in my new book on the authentic Adam Smith, much of what he got right or pioneered and which today’s scholars seem to have missed, includes the germ of significant elements of modern science.

Moreover, the alarming fact must also be recognised that key elements of how today’s economics, preached (a deliberately chosen word ) by most modern economists (Nobel Prize winners and all) became spectacularly wrong by a silly error enunciated by Paul Samuelson from 1948. Nobel Prize winner, Samuelson, misdescribed Adam Smith’s use of the commmon 17th-18th century metaphor of ‘an invisible hand’ to describe a simple arithmetic truth that had nothing to do with what it is alleged today to contribute to an economy, as allegedly ‘proven’ by advanced modern mathematics.

Well, less Blog commenting for now. Its time to get back to the manuscript of my new book …